Around the Firms

Brobeck's Books

Top partners at Brobeck, Phleger & Harrison were continuing to enjoy million dollar-plus paydays even as the firm rapidly lost steam in the wake of the dot-com bust, partner compensation records show.

And in some cases, rainmakers pocketed $200,000 or more in bonuses in the months before the firm's January announcement that it would close its doors.

The partner compensation records ' which recently came to light as part of the firm's bankruptcy ' provide a detailed look into the financial life of Brobeck as it struggled through its final year. The records also provide a rare glimpse of which partners were bringing home the biggest paychecks and may be a good indicator of the current earning power of ex-Brobeck rainmakers.

The records show that Tower Snow Jr., a securities litigation rainmaker and former firm chairman, was at the top of Brobeck's partnership compensation pyramid – which consisted of 12 separate levels. Snow was the only partner occupying a spot in the 12th tier, and in 2001 ' his last full year with Brobeck ' he took home an estimated $1.4 million, not counting bonuses. Snow was expelled from the firm in May 2002 and later joined Clifford Chance.

Corporate honcho Warren Lazarow ' now a partner at O'Melveny & Myers ' also brought home a tidy sum. His 2001 base pay was $1.14 million. In 2002, he picked up a $250,000 bonus and occupied a compensation level just under Snow's. He was joined by one other partner in the 11th tier, firm Chairman Richard Odom.

But base pay wasn't the only money available for partners. Like Lazarow, other partners pulled in hundreds of thousands of dollars in bonus cash. Large bonuses, former partners said, were paid out to top billers to compensate them for their rainmaking abilities.

Zager was a key rainmaker whose January jump to Akin Gump Strauss Hauer & Feld was part of a chain of events that led to the firm's demise. Following his resignation, Morgan, Lewis & Bockius immediately called off merger discussions with Brobeck, and Brobeck's policy committee decided to pull the plug on the firm.

The partner compensation review includes the salary levels of Brobeck partners, bonus distribution, billable hours and income generated from specific clients. Former managing partner Richard Parker submitted it to Brobeck's management committees on Jan. 10, anticipating that it would provide a guide for compensation levels in 2003. However, the firm pulled the plug just three weeks later.

Brobeck had suffered 2 years of double-digit declines in profitability. Average profits per partner peaked at $1.17 million in 2000, and by the end of 2002 had slid to $555,000.

As the firm neared a meltdown, partners like Lazarow and Zager were still billing for millions of dollars. But occupying a top compensation tier wasn't necessarily based upon billables. Odom, for example, billed just 109 hours in 2002, but as chairman of the firm was in the million-dollar club. Snow had comparable billables during 2001 when he was still chairman, the records show.

The compensation records may be used by bankruptcy trustees to evaluate the firm's financial standing prior to its collapse. Former Brobeck senior counsel Jayne Loughry, one of the plaintiffs in an employee suit against Brobeck for severance pay, submitted the document to interim trustee Lynn Schoenmann at a meeting of creditors two weeks ago. Partners contacted for this story confirmed the accuracy of the document.

Among its assets the firm lists a $1 million promissory note from a liquidation trust set up to pay for a suit against Clifford Chance and Snow by retired Brobeck partners and several staff members. They claim Snow and Clifford Chance contributed to the collapse of Brobeck and are seeking at least $100 million in damages.

(By Brenda Sandburg, The Recorder)

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Claim Proceeds Against Weil, Gotshal & Manges

A Manhattan Supreme Court judge has dismissed a legal malpractice claim against Weil, Gotshal & Manges but permitted a claim for breach of fiduciary duty to go forward.

Annette and Randi Fischer, principals of Fashion Boutique of Short Hills Inc., had charged that Weil Gotshal had been conflicted in representing them in a suit against Fendi USA Inc. because the firm also represented Prada USA, which acquired a substantial interest in Fendi during the representation.

Unlike their malpractice claim, the Fischers' breach of fiduciary duty claim did not require a showing of proximate causation of damage, Manhattan Supreme Court Justice Richard B. Lowe wrote in Weil, Gotshal & Manges v. Fashion Boutique. Rather, they needed only to show that the alleged conflict was a significant factor in the alleged economic loss.

“The litigation business which Weil Gotshal was receiving from Prada, beginning in late 1999, could arguably have adversely affected the quality of Weil Gotshal's representation of Fashion Boutique in its action against Fendi, given Prada's acquisition of an ownership interest in the parent company of Fendi, also in late 1999,” the judge wrote.

The Fischers sued Weil Gotshal for $15.6 million in a counterclaim action following a suit by the law firm for $2.7 million in unpaid legal bills.

The Fischers hired Weil Gotshal in 1993 to sue Fendi in federal court for conduct that allegedly violated the federal Lanham Act as well as New York state laws governing product disparagement and slander.

Fashion Boutique, which sold only Fendi goods in its store in New Jersey's Short Hills Mall, claimed that Fendi had engaged in a campaign to disparage Fashion Boutique, which competed with the company's own Manhattan store.

(By Anthony Lin, New York Law Journal)

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Times Are Changing

As we enter 2004, several firms have undergone or will undergo changes in their upper echelon:

• Baker & Hoestetler has two new executive partners. F. Steven Kestner and Alec Wightman, who will be based, respectively, in the home office and in the Columbus, OH, location, have replaced Gary L. Bryenton.
• It's a new managing board for Pillsbury Winthrop: At the helm are San Francisco chairperson Mary B. Cranston, San Diego Executive Vice Chairman David R. Snyder, and Marina H. Park, a managing partner in Silicon Valley. The board comprises, among others, William P. Atkins of McLean, Va.; Philip L. Douglas, David P. Falck, and Michael Schumaecker of New York; Michael J. Finnegan and Edward J. Perron of Los Angeles; Michael J, Finnegan and Edward A. Perron of Los Angeles; and Kirk M. Hasson, Terry M. Kee, and Andrea A. Wirum from San Francisco.
• At Proskauer Rose in New York, Marc A. Persily has been moved up to partnership. Formerly, Persily was part of the corporate department and private equity practice group. He serves as an advisor to financial institutions, including investment banks, in Europe and Latin American as well as in the United States.
• New Year's Day will bring a new firmwide managing partner for Michael Best & Friedrich: Richard J. Canter, a partner who has been established for 14 years in the Milwaukee office, during which time he assisted in launching and developing Michael Best's health law practice group. Canter replaces John R. Sapp.
• Late in November, California Third District Court of Appeal Justice Daniel Kolkey made it known that he will depart the court and serve in Gibson, Dunn & Crutcher's San Francisco office as a partner. Kolkey served in this capacity of Gibson Dunn's Los Angeles office before taking his position in 1995 as Gov. Pete Wilson's legal affairs secretary. After serving on the court for close to 5 years, Kolkey desired a change; he will now work with Theodore Boutrous Jr. and Miguel Estrada, who serve, respectively, the Los Angeles and Washington offices.

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Teri Zucker Law Firm Partnership & Benefits Report [email protected]

Brobeck's Books

Top partners at Brobeck, Phleger & Harrison were continuing to enjoy million dollar-plus paydays even as the firm rapidly lost steam in the wake of the dot-com bust, partner compensation records show.

And in some cases, rainmakers pocketed $200,000 or more in bonuses in the months before the firm's January announcement that it would close its doors.

The partner compensation records ' which recently came to light as part of the firm's bankruptcy ' provide a detailed look into the financial life of Brobeck as it struggled through its final year. The records also provide a rare glimpse of which partners were bringing home the biggest paychecks and may be a good indicator of the current earning power of ex-Brobeck rainmakers.

The records show that Tower Snow Jr., a securities litigation rainmaker and former firm chairman, was at the top of Brobeck's partnership compensation pyramid – which consisted of 12 separate levels. Snow was the only partner occupying a spot in the 12th tier, and in 2001 ' his last full year with Brobeck ' he took home an estimated $1.4 million, not counting bonuses. Snow was expelled from the firm in May 2002 and later joined Clifford Chance.

Corporate honcho Warren Lazarow ' now a partner at O'Melveny & Myers ' also brought home a tidy sum. His 2001 base pay was $1.14 million. In 2002, he picked up a $250,000 bonus and occupied a compensation level just under Snow's. He was joined by one other partner in the 11th tier, firm Chairman Richard Odom.

But base pay wasn't the only money available for partners. Like Lazarow, other partners pulled in hundreds of thousands of dollars in bonus cash. Large bonuses, former partners said, were paid out to top billers to compensate them for their rainmaking abilities.

Zager was a key rainmaker whose January jump to Akin Gump Strauss Hauer & Feld was part of a chain of events that led to the firm's demise. Following his resignation, Morgan, Lewis & Bockius immediately called off merger discussions with Brobeck, and Brobeck's policy committee decided to pull the plug on the firm.

The partner compensation review includes the salary levels of Brobeck partners, bonus distribution, billable hours and income generated from specific clients. Former managing partner Richard Parker submitted it to Brobeck's management committees on Jan. 10, anticipating that it would provide a guide for compensation levels in 2003. However, the firm pulled the plug just three weeks later.

Brobeck had suffered 2 years of double-digit declines in profitability. Average profits per partner peaked at $1.17 million in 2000, and by the end of 2002 had slid to $555,000.

As the firm neared a meltdown, partners like Lazarow and Zager were still billing for millions of dollars. But occupying a top compensation tier wasn't necessarily based upon billables. Odom, for example, billed just 109 hours in 2002, but as chairman of the firm was in the million-dollar club. Snow had comparable billables during 2001 when he was still chairman, the records show.

The compensation records may be used by bankruptcy trustees to evaluate the firm's financial standing prior to its collapse. Former Brobeck senior counsel Jayne Loughry, one of the plaintiffs in an employee suit against Brobeck for severance pay, submitted the document to interim trustee Lynn Schoenmann at a meeting of creditors two weeks ago. Partners contacted for this story confirmed the accuracy of the document.

Among its assets the firm lists a $1 million promissory note from a liquidation trust set up to pay for a suit against Clifford Chance and Snow by retired Brobeck partners and several staff members. They claim Snow and Clifford Chance contributed to the collapse of Brobeck and are seeking at least $100 million in damages.

(By Brenda Sandburg, The Recorder)

---

Claim Proceeds Against Weil, Gotshal & Manges

A Manhattan Supreme Court judge has dismissed a legal malpractice claim against Weil, Gotshal & Manges but permitted a claim for breach of fiduciary duty to go forward.

Annette and Randi Fischer, principals of Fashion Boutique of Short Hills Inc., had charged that Weil Gotshal had been conflicted in representing them in a suit against Fendi USA Inc. because the firm also represented Prada USA, which acquired a substantial interest in Fendi during the representation.

Unlike their malpractice claim, the Fischers' breach of fiduciary duty claim did not require a showing of proximate causation of damage, Manhattan Supreme Court Justice Richard B. Lowe wrote in Weil, Gotshal & Manges v. Fashion Boutique. Rather, they needed only to show that the alleged conflict was a significant factor in the alleged economic loss.

“The litigation business which Weil Gotshal was receiving from Prada, beginning in late 1999, could arguably have adversely affected the quality of Weil Gotshal's representation of Fashion Boutique in its action against Fendi, given Prada's acquisition of an ownership interest in the parent company of Fendi, also in late 1999,” the judge wrote.

The Fischers sued Weil Gotshal for $15.6 million in a counterclaim action following a suit by the law firm for $2.7 million in unpaid legal bills.

The Fischers hired Weil Gotshal in 1993 to sue Fendi in federal court for conduct that allegedly violated the federal Lanham Act as well as New York state laws governing product disparagement and slander.

Fashion Boutique, which sold only Fendi goods in its store in New Jersey's Short Hills Mall, claimed that Fendi had engaged in a campaign to disparage Fashion Boutique, which competed with the company's own Manhattan store.

(By Anthony Lin, New York Law Journal)

---

Times Are Changing

As we enter 2004, several firms have undergone or will undergo changes in their upper echelon:

• Baker & Hoestetler has two new executive partners. F. Steven Kestner and Alec Wightman, who will be based, respectively, in the home office and in the Columbus, OH, location, have replaced Gary L. Bryenton.
• It's a new managing board for Pillsbury Winthrop: At the helm are San Francisco chairperson Mary B. Cranston, San Diego Executive Vice Chairman David R. Snyder, and Marina H. Park, a managing partner in Silicon Valley. The board comprises, among others, William P. Atkins of McLean, Va.; Philip L. Douglas, David P. Falck, and Michael Schumaecker of New York; Michael J. Finnegan and Edward J. Perron of Los Angeles; Michael J, Finnegan and Edward A. Perron of Los Angeles; and Kirk M. Hasson, Terry M. Kee, and Andrea A. Wirum from San Francisco.
• At Proskauer Rose in New York, Marc A. Persily has been moved up to partnership. Formerly, Persily was part of the corporate department and private equity practice group. He serves as an advisor to financial institutions, including investment banks, in Europe and Latin American as well as in the United States.
• New Year's Day will bring a new firmwide managing partner for Michael Best & Friedrich: Richard J. Canter, a partner who has been established for 14 years in the Milwaukee office, during which time he assisted in launching and developing Michael Best's health law practice group. Canter replaces John R. Sapp.
• Late in November, California Third District Court of Appeal Justice Daniel Kolkey made it known that he will depart the court and serve in Gibson, Dunn & Crutcher's San Francisco office as a partner. Kolkey served in this capacity of Gibson Dunn's Los Angeles office before taking his position in 1995 as Gov. Pete Wilson's legal affairs secretary. After serving on the court for close to 5 years, Kolkey desired a change; he will now work with Theodore Boutrous Jr. and Miguel Estrada, who serve, respectively, the Los Angeles and Washington offices.

---

Teri Zucker Law Firm Partnership & Benefits Report [email protected]